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XE Morning Update

The NZDUSD opens at 0.6617 (mid-rate) this morning.

Currency markets are firmly focused on tonight's signing of the US-China phase 1 trade deal. Most interest surrounds how much detail will be revealed by both sides. In the USA President Trump will no doubt claim it as a great deal whilst the Chinese will want to paint a picture of minimal concessions. Two key aspects will be the timing and rate of existing Tariffs being reduced and also any implied level of currency appreciation for the Chinese Yuan. The Yuan has already appreciated 4.0% over the past month so it will be interesting to see how much more it strengthens.

Staying in the USA, the Consumer price data came in slightly below expectations with underlying wage and earnings data also disappointing. The absence of wage pressure will make it more likely that the US Federal Reserve considers lowering US interest rates further over the next six months. Inflation has remained stubbornly low so a further rate cut seems likely at some point.

In the market, the NZDAUD cross rate has dropped back below the 0.9600 level for the first time this year. This reflects the fact that the AUD should benefit more from the trade deal being signed than the NZD.

Yesterday's Chinese trade data was much better than expected with both Exports and Imports surging in anticipation of the trade deal being agreed.

On Thursday night we get an update on US Retail sales which will be a key piece of data given the strength of the consumer sector in the US over 2019.

Global equity markets were mixed overnight - Dow +0.04%, S&P 500 -0.1%, FTSE +0.06%, DAX +0.04%, CAC -0.08%, Nikkei +0.73%, Shanghai -0.28%.

Gold prices are 0.28% lower, at $1,546, while WTI Crude Oil is up 0.4% trading at $58.47 a barrel.

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